Marissa Mayer Has Made A Mistake, Say AOLers Who Have Seen This Movie Before (YHOO, AOL)

Nicholas Carlson, provided by

Published 7:30 am, Friday, October 5, 2012

Back in 2009, AOL CEO Tim Armstrong was, like Yahoo CEO Marissa Mayer is now, a hot shot ex-Google executive who had already banked fame and fortune, ready to take on a riskier, higher-profile job for the sake of legacy.

When he took the job, Armstrong hired a lot of rising industry stars he'd met at Google.

Three years later, a few of those people are still at AOL. Many are gone. All have deep, firsthand experience of what it's like trying to turn around a company that had — still has — many of the same challenges Yahoo and Marissa Mayer face now.

So, naturally, these people are paying close attention to the moves she is making.

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Like most people in the industry, they all pretty much agree that so far, Mayer is making all the right moves.

Except for one.

Mayer has put a great deal of her efforts so far into improving Yahoo's culture. She's given employees free meals and free iPhones. She's keeping the lights on later. She's throwing a fancier Christmas party.

Veterans of Armstrong's attempted turnaround all say this is smart. They just question the timing.

It's pretty obvious to anyone paying close attention to Yahoo that one big part of Mayer's turnaround is going to have to be layoffs. Massive layoffs. Marc Andreessen says Yahoo needs to fire 10,000 of its 18,000 full-time and part-time employees. We've heard the same figure from a source inside Yahoo.

Mayer didn't bring up layoffs at her all-hands meeting with Yahoo employees to announce her turnaround plan for the company, but we were told by a source familiar with her thinking that the only reason for this was that the day was supposed to be a positive day. Layoffs remain a likely move for her. She recently hired a CFO, Ken Goldman, who is a noted cost-cutter.

The people who joined Armstrong in trying to turn around AOL say that Mayer has made a mistake trying to improve morale before getting these layoffs over with first.

When Armstrong came into AOL, he also quickly set about trying to improve morale. And it worked. But then, six months or so later, AOL went through its layoffs, and the mood was spoiled.

These folks say that what Mayer should have done is can the 10,000 people Yahoo needs to can, and then communicate a very clear message the people left behind: This is a startup now. You are the winners. We are going to make this a wonderful place to work in a way we could not before; with free food, iPhones, and better perks.

You probably don't remember the movie "Margin Call," a small film that came out a couple years ago. It's about a Wall Street bank going through the initial stages of the financial crises.

Talking to a veteran of the Armstrong effort at AOL yesterday, a scene from the movie came up because it perfectly illustrates the kind of communication Mayer should have planned to make to people who survived the layoffs.

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